Dallas, Oct. 20 - Brinker International, Inc. announced first quarter fiscal 2010 earnings per diluted share of $0.17 compared to $0.20 for the first quarter of fiscal 2009, before special items and excluding Romano's Macaroni Grill® (reconciliation included in Table 2). On a GAAP basis, earnings per diluted share decreased to $0.15 from $0.23 for the first quarter in the prior year.
In the second quarter of fiscal 2009, the company completed the sale of Macaroni Grill while retaining a minority ownership interest. The information presented below includes Macaroni Grill unless otherwise noted.
Quarterly Revenues
Brinker reported revenues for the 13-week period of $778.1 million, a decrease of 21.0 percent compared with $984.4 million reported for the same period of fiscal 2009. The company experienced a 6.0 percent decrease in comparable restaurant sales (see Table 1) in the first quarter of fiscal 2010. Revenues were also negatively impacted by a net decline in capacity of 18.6 percent due to the sale of 198 restaurants since the first quarter of fiscal 2009 (189 of which were Macaroni Grills) and 49 restaurant closures (three of which were Macaroni Grills). Royalty and franchise revenues were $15.8 million for the quarter.
Table 1: Q1 comparable restaurant sales
Q1 10 and Q1 09, company and three reported brands; percentage
Q1 10 Q1 09 Q1 10
Comparable Comparable Pricing Q1 10
Sales Sales Impact Mix-Shift
----------- ---------- ------- ---------
Brinker International(1) (6.0) (3.0) 1.8 (2.5)
Chili's (6.0) (3.0) 1.9 (2.4)
On The Border (5.1) (3.3) 2.2 (4.1)
Maggiano's (6.6) (3.3) 0.9 (2.0)
(1) Brinker International comparable restaurant sales exclude the impact
of Macaroni Grill.
Quarterly Operating Performance
Cost of sales, as a percent of revenues, decreased from 28.4 percent in the prior year to 28.2 percent in the first quarter of fiscal 2010. Menu changes at Chili's® Grill & Bar and On The Border Mexican Grill & Cantina® and favorable price changes resulted in improvements in cost of sales. These improvements more than offset the impact of recent promotions and unfavorable commodity prices primarily related to dairy, chicken and beef.
Restaurant expenses, as a percent of revenues, decreased to 58.5 percent from 58.8 percent in the prior year primarily due to lower utility and pre-opening expenses, partially offset by higher labor costs.
Depreciation and amortization decreased $2.3 million compared to the prior year due to fully depreciated assets and restaurant closures, partially offset by asset replacements and investments in existing restaurants.
General and administrative expense decreased $3.8 million for the quarter primarily due to reduced salary expense from lower headcount and income related to transitional services provided to Macaroni Grill, partially offset by increased insurance expense.
Interest expense decreased $2.5 million due to lower interest rates and lower average borrowings.
The effective income tax rate decreased to 26.1 percent in the current quarter as compared to 26.5 percent in the same quarter of last year due to leverage from FICA tip credits.
Special Items
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Table 2: Reconciliation of net income, before special items (1)
Q1 10 and Q1 09; $ millions and $ per diluted share after-tax
EPS EPS
Item Q1 10 Q1 10 Q1 09 Q1 09
---- ----- ----- ----- -----
Net Income 15.8 0.15 23.8 0.23
Other (Gains) and Charges 1.7 0.02 3.1 0.03
--- ---- --- ----
Net Income before Special Items 17.5 0.17 26.9 0.26
Macaroni Grill before Special Items - - (6.3) (0.06)
---- ---- ----- -----
Adjusted Net Income before Special
Items and Macaroni Grill 17.5 0.17 20.6 0.20
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(1) The company believes excluding other gains and charges and Macaroni
Grill from its financial results provides investors with a clearer
perspective of the company's ongoing operating performance and a more
relevant comparison to prior period results.
Cash Flow and Capital Allocation
Cash flow from operations for the first quarter fiscal 2010 increased to $66.4 million compared to $53.4 million in the prior year. Capital expenditures totaled $13.5 million, a reduction of $17.8 million compared to the prior year resulting from a decrease in new company-owned restaurant development. Due to strong cash flows, the Company has elected to pay $50.0 million on the outstanding term loan on October 21, 2009 which will reduce the balance to $340.0 million.
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BRINKER INTERNATIONAL, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Thirteen Week Periods Ended
---------------------------
Sept. 23, Sept. 24,
2009 2008
---- ----
Revenues $778,081 $984,407
Operating Costs and Expenses:
Cost of sales 219,477 278,967
Restaurant expenses 455,082 579,127
Depreciation and amortization 38,869 41,156
General and administrative 35,924 39,764
Other gains and charges (a) 2,787 4,953
----- -----
Total operating costs and expenses 752,139 943,967
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Operating income 25,942 40,440
Interest expense 6,948 9,457
Other, net (2,342) (1,372)
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Income before tax expense 21,336 32,355
Income tax expense 5,569 8,574
----- -----
Net income $15,767 $23,781
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Basic net income per share $0.15 $0.23
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Diluted net income per share $0.15 $0.23
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Basic weighted average
shares outstanding 102,243 101,630
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Diluted weighted average
shares outstanding 103,016 102,762
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(a) Current year other gains and charges primarily includes lease
termination costs of $2.0 million and severance costs of $0.5 million.
Prior year other gains and charges primarily includes lease
termination costs of $2.0 million, uninsured costs related to
hurricanes of $1.7 million and expenses related to the pending sale of
Macaroni Grill of $1.3 million.
BRINKER INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept. 23, June 24,
2009 2009
---- ----
(Unaudited)
ASSETS
Current assets $370,514 $369,215
Net property and equipment (a) 1,370,233 1,400,352
Total other assets 180,683 179,380
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Total assets $1,921,430 $1,948,947
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current installments of long-term debt $1,859 $1,815
Current liabilities 374,754 407,067
Long-term debt, less current installments 726,990 727,447
Other liabilities 164,177 165,694
Total shareholders' equity 653,650 646,924
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Total liabilities and shareholders' equity $1,921,430 $1,948,947
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(a) At September 23, 2009, the company owned the land and buildings for
224 of the 1,023 company-owned restaurants. The net book values of
the land and buildings associated with these restaurants totaled
$178.2 million and $947.1 million, respectively.
BRINKER INTERNATIONAL, INC.
RESTAURANT SUMMARY
First First
Quarter Quarter
Total Openings/ Closings/ Total Projected
Restaurants Acquisitions Sales Restaurants Openings
June 24, Fiscal Fiscal Sept. 23, Fiscal
2009 2010 2010 2009 2010
---- ---- ---- ---- ----
Company-Owned
Restaurants:
Chili's 858 - 1 857 -
On The Border 122 - - 122 1
Maggiano's 44 - - 44 1
International(a) - - - - -
----- ----- ----- ----- -----
1,024 - 1 1,023 2
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Franchise
Restaurants:
Chili's 434 6 1 439 13-16
On The Border 30 1 - 31 1-3
International(a) 201 5 - 206 30-35
---- ----- ----- ----- -----
665 12 1 676 44-54
===== ===== ===== ===== =====
Total
Restaurants:
Chili's 1,292 6 2 1,296 13-16
On The Border 152 1 - 153 2-4
Maggiano's 44 - - 44 1
International 201 5 - 206 30-35
----- ----- ----- ----- -----
1,689 12 2 1,699 46-56
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(a) At September 23, 2009, international franchise restaurants by brand
were 197 Chili's and nine On The Border restaurants.